Stocks posted their strongest day in two months after President Donald Trump canceled planned strikes on Iran, raising hopes for a deal that could restore oil flows through the Strait of Hormuz.
By yourNEWS Media Newsroom
U.S. stocks rallied Thursday for their best day in two months after President Donald Trump called off planned evening strikes against Iran, easing fears of a wider conflict and sending oil prices lower.
The Dow Jones Industrial Average jumped 929.97 points, or 1.9%. The S&P 500 rose 1.8%, recovering from back-to-back losses that had pulled the index back to early May levels. The Nasdaq composite climbed 2.5%, helped by a rebound in semiconductor and artificial intelligence-related stocks.
Markets moved higher immediately after Trump said on his social media platform that “discussions with the Islamic Republic of Iran have been brought to the highest level of Iranian leadership and approved.” He added that the time and place of a signing would “be announced shortly.”
The announcement raised investor hopes that a deal could restore the flow of oil from the Persian Gulf and reduce pressure on global energy markets.
A potential agreement could reopen the Strait of Hormuz, a critical shipping route for crude oil moving from the Persian Gulf to customers around the world.
Benchmark U.S. crude fell 2.8% to $87.56 per barrel. Brent crude, the international standard, dropped 3.5% to $89.84 per barrel, though it remained well above its roughly $70 level before the war.
Oil prices had climbed sharply as the United States and Iran exchanged attacks in recent days, threatening a ceasefire that had held uneasily for more than a month.
The conflict has added pressure to inflation, and a report Thursday showed U.S. wholesale prices rose more than economists had expected in May.
The inflation effect has also spread beyond the United States. The European Central Bank on Thursday became the first major central bank to raise interest rates in response to the recent energy-driven inflation surge.
Higher interest rates can help restrain inflation, but they also slow economic growth and weigh on prices for stocks, cryptocurrencies and other investments. Expensive areas of the market, including artificial intelligence stocks, are often especially sensitive to higher rates.
AI stocks have been driving much of Wall Street’s volatility over the past week. After soaring to records, some of the sector’s biggest names abruptly reversed lower, raising questions about whether investor enthusiasm had pushed prices too high too quickly.
Those stocks were already recovering early Thursday before Trump’s Iran announcement added momentum to the broader market.
Marvell Technology rose 6.3% after several days of sharp swings. The stock recently plunged 16.7%, jumped 9.6% and then fell more than 5% on two consecutive days. Before that, it posted a 32.5% one-day surge, the best in its history, after Nvidia CEO Jensen Huang suggested it could become “the next trillion-dollar company.” At the time, Marvell was valued at slightly more than $190 billion.
Chipmaking-related companies also posted some of the day’s biggest gains. Lam Research rose 10.7%, and KLA climbed 11%.
Those gains helped offset an 11% drop in Oracle. The company reported stronger quarterly profit than analysts expected but said it expects to raise $40 billion in cash this fiscal year through borrowing and stock sales. Oracle had raised $48 billion last fiscal year to help fund artificial intelligence investments.
Other companies have also faced pressure from investors after announcing heavy AI spending plans. Markets are increasingly focused on whether such investments will deliver the profits and productivity gains promised by AI supporters.
Bond yields fell as oil prices retreated, reducing some inflation pressure.
The yield on the 10-year Treasury dropped to 4.48% from 4.55% late Wednesday.
A sustained decline in oil prices could give the Federal Reserve more room to keep its benchmark interest rate unchanged this year, rather than raising it to fight inflation. Before Trump’s announcement, many traders had been increasing bets that the Fed might need to hike rates because of high inflation and a resilient U.S. labor market.
After Trump called off the planned strikes, traders reduced their expectations for a possible rate increase this year, according to CME Group data.
Smaller companies, which tend to benefit more from lower borrowing costs because many rely on credit to grow, led the market higher. The Russell 2000 index of smaller U.S. stocks rose 2.6%.
Overseas markets were more subdued. European indexes posted modest gains, while Asian markets ended mixed. London’s FTSE 100 rose 0.5%, while Hong Kong’s Hang Seng fell 0.7%.
Thursday’s rally underscored how closely markets are tied to the U.S.-Iran conflict, oil prices and expectations for Federal Reserve policy. For now, investors responded to Trump’s decision to cancel the strikes as a sign that diplomacy may still prevent a broader war and ease pressure on global energy supplies.
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